The cotton market has hit a critical breakdown point. On June 23, the main contract of Zhengzhou Cotton Futures fell below the key psychological level of 16,000 yuan per ton, closing at 15,905 yuan per ton, down 105 yuan from the previous settlement. This level is not only a technical support but also a psychological watershed for the entire industry chain.
Supply-Demand Logic Behind the Breakdown
The direct driver of the decline came from a dual resonance of macro and industrial factors. On one hand, the entire commodity market weakened, with capital flowing out of the cotton sector and bearish sentiment rising. On the other hand, the spot market lacked effective support. The domestic cotton 3128B price index stood at 17,631 yuan per ton, down only 1 yuan, but the real picture lies in the shrinking trading volume.
Order recovery at downstream textile mills has been much slower than expected. Finished product inventories remain high, forcing mills to adopt a conservative procurement strategy—buying only as needed, in small batches, with virtually no bulk purchasing. This destocking rhythm prevents the spot market from forming a solid price floor.
External Transmission: Supply Glut and a Strong Dollar
Bearish factors in the international market are more concentrated. The ICE cotton main contract closed at 78.59 cents per pound, down 1.03% in a single day. US cotton planting is nearly complete, and market expectations for new-season production have been revised upward, creating long-term supply pressure. Meanwhile, a stronger dollar has suppressed the valuation of dollar-denominated commodities, with capital exiting the cotton market amid a broader sell-off in energy, grains, and financial assets.
The external decline directly transmitted to China's port market. On June 24, imported cotton quotes fell across the board. The international cotton price index for SM grade dropped 0.59 cents to 88.92 cents per pound, translating to a delivered price of 14,961 yuan per ton. The M grade fell 0.72 cents to 86.99 cents per pound, translating to 14,627 yuan per ton. Notably, the M grade fell more than the SM grade, indicating shrinking demand for quality premiums.
Narrowing Spread Fails to Boost Buying
After the drop in imported cotton quotes, the domestic-import price spread narrowed. Theoretically, a narrower spread should make imported cotton more competitive, but that hasn't happened. Downstream mills remain cautious, unwilling to commit even at relatively attractive prices. This highlights that the core issue is not price but end-consumer demand uncertainty.
For import traders, this means a widening risk exposure. Port inventories are building up, and RMB exchange rate volatility adds to the difficulty of forward hedging. In the short term, the imported cotton market is likely stuck in a cycle of "lower quotes, thin trading."
No Rebound Catalyst in Sight; Three Variables to Watch
The core logic suppressing cotton prices has not reversed. The new-season supply glut outlook for US cotton persists, macro pressure from a strong dollar and weak commodities remains, and domestic textile consumption recovery is sluggish. Zhengzhou futures, spot prices, and port imported cotton are likely to continue their weak, range-bound trend.
The market awaits new positive catalysts. Three key variables deserve close monitoring:
- US cotton belt weather: Extreme drought or excessive rainfall could alter production expectations
- Domestic textile orders: Overseas apparel retail data and China's Singles' Day preparation are critical inflection points
- RMB exchange rate: If depreciation accelerates, it will raise imported cotton costs, providing some support for domestic prices
Until substantial improvement appears on either the supply or demand side, the cotton market's weak pattern is unlikely to break.